Agenda decision

The issue is to clarify the definition of ‘investment-related services or activities’ as it relates to ‘tax optimisation’ intermediate subsidiaries.

The Interpretations Committee received a request to clarify the definition of ‘investment-related services or activities’ as it relates to ‘tax optimisation’ intermediate subsidiaries.

Some investment entities establish wholly-owned intermediate subsidiaries in certain jurisdictions, which own all or part of the portfolio of investments in the group structure. The sole purpose of the intermediate subsidiaries is to minimise the tax paid by investors in the ‘parent’ investment entity. There is no activity within the subsidiaries and the tax advantage comes about because of returns being channelled through the jurisdiction of the intermediate subsidiary. The submitter asked whether the ‘tax optimisation’ described should be considered investment-related services or activities.